Which of the following is a characteristic of an incentive stock option?
A)The issuer recognizes compensation expense if the strike price is below the stock's selling price when the option is granted.
B)The issuer recognizes a compensation deduction when the option is exercised.
C)The option holder recognizes compensation income when the option is exercised.
D)The option holder recognizes capital gain when the stock acquired with the option is sold.

Question

Quizplus · Accepted Answer

Incentive stock options (ISOs) allow the holder to recognize capital gain rather than ordinary income upon the sale of the stock, assuming certain conditions are met, such as holding the stock for a specified period after exercising the option. This is a key tax advantage of ISOs.

Which of the Following Is a Characteristic of an Incentive